Thursday, June 26, 2014

by Gary SnyderThe American Red Cross raised and spent over $300 million after Hurricane Sandy.It wants to keep it a secret.The charity has hired a top-flight law firm to fight a public request. It is arguing that information about its Sandy activities is a "trade secret."

The documents include "internal and proprietary methodology and procedures for fundraising, confidential information about its internal operations, and confidential financial information," wrote Gabrielle Levin of Gibson Dunn in a letter to the attorney general's office.

If those details were disclosed, "the American Red Cross would suffer competitive harm because its competitors would be able to mimic the American Red Cross's business model for an increased competitive advantage," Levin wrote.

Doug White, a nonprofit expert who directs the fundraising management program at Columbia University, said that it's possible for nonprofits to have trade interests — the logo of a university, for example — but it's not clear what a "trade secret" would be in the case of the Red Cross. He called the lawyer's letter an apparent "delaying tactic."

Ben Smilowitz of the Disaster Accountability Project, a watchdog group, said, "Invoking a 'trade secret' exemption is not something you would expect from an organization that purports to be 'transparent and accountable.'" (source)

Much of the ARC position runs counter to the reason the Internal Revenue Service, yes, wants full transparency and accountability.

The American Red Cross has a long history of questionable practices (here); notwithstanding Congressional Investigation.

Thursday, June 19, 2014

As part of a 2013
investigation, a Washington Post reporter saw that the American Legacy Foundation
had marked a "significant diversion of assets" on its tax form.
The Post was informed that its former information-technology director and
vice president, Deen Sanwoola, embezzled $3.4 million from 1999 to 2007, the
years Sanwoola worked at the foundation's headquarters.

An employee reported that inventory
was missing in 2007 or 2008, but the supervisor receiving the report didn't
take action because Sanwoola had been a trusted employee who was well-liked,
according to Legacy officials interviewed by The Post.

The same employee reported to a
different supervisor three years later. That time, the report was taken
seriously. CEO Cheryl Healton ordered a forensic audit. When the investigation
indicated fraud, Legacy called the local U.S. attorney.

Because
Sanwoola controlled ordering and inventory in the department, no controls were
in place to tip off other Legacy executives that money from the nonprofit's $50
million annual budget was disappearing, Idaho Attorney General
Lawrence Wasden, then the foundation's chairman, Wasden said. Wasden said that he also served on an auditing
committee while the embezzlement took place. He said he asked auditors if they
received cooperation from managers and was told they had the access they
needed. The audits did not detect the embezzlement, and Wasden said he received
no hints that anything was wrong.

Sanwoola was operating a video-game
emporium in Nigeria when the article ran. He was incredulous when The Post
contacted him for comment, saying he knew nothing of the embezzlement.

No charges were filed. The U.S.
Attorney's Office told The Post that Legacy had taken too long to report the
missing inventory and lacked records of its inventory.

Legacy was one of more than 1,000
nonprofits nationwide that checked the "significant diversion" boxes
on their annual tax reporting forms from 2008 to 2012. The top 10 diversions
alone totaled more than a half-billion dollars.

Most nonprofits are reluctant to
disclose fraud because they fear they'll lose trust of the agencies and donors
that support them, said Denise McClure, owner of Averti Solutions, a forensic
accounting service in Boise. She said nonprofits that come clean usually come
out ahead, as the Boise affiliate of the Susan G. Komen for the Cure did in
2008 after admitting an employee stole more than $170,000 intended for breast
cancer research, screening, education and treatment. McClure said Komen
regained donors it lost after the disclosure because it re-established trust. (source)

Tuesday, June 17, 2014

by Gary SnyderThe latest edition of Nonprofit Imperative has the normal failures of governance such as over $18 million of fraud by religious-related organizations. That aside, there is apparently a growing problem with our higher educational institutions. For example:

Texas A&M $75,000 (over 4 years to detect)

N.C. Foundation $400,000 (over 3 years)

Princeton University Triangle Club $180,000 (over 6 years)

UC Berkeley $90,000 (over 2 years; by a previously convicted felon that was in a position of responsibility)

Westfield State University (President resigns: $160,000 worth of questionable expenses)

University of Rhode Island Feinstein College of Continuing Education $200,000

With little oversight, we will be monitoring to see if this month is an aberration.

exposing the crisis in nonprofit
fraud leadership…a crisis of pervasive and monumental waste, fraud, abuse,
mismanagement, and malfeasance throughout the charitable sector which
costs taxpayers and contributors tens of billions of dollars annually;
and,

seeking reforms that will restore
the public’s lost confidence in the sector.

What’s
Included:

Skunk of the Month:

Island Child Development Ctr.; Urban Life Ministries (and
four other church-related frauds)

Charity Check Up:

UK Children’s
Charities; Foundation for America’s Homeless

A Thought or Two:

Slave
Crusader Ouster; Serial Embezzler

Nonprofit News-In Case You Missed It:

Robin Hood Fund; Boy
Scouts; Girl Scouts of Greater Los Angeles …more

Political/Official Chicanery:

SC; PA; OK; CA; VA; SD…more

What Do You
Think?

The Charities Aid Foundation in London published
itsannual world giving index and the U.S. was only 13th
when it came to donating money. It ranked third place in giving time and first
place when it came to helping out someone in need.

-------------

The new IRS Form 1023-“EZ”would
all but eliminate the current due diligence undertaken by the IRSbynot
requiring applicants for charitable status to supply supporting documentation
and information about their planned activities.

The IRS
will presumably not perform a detailed review to ensure that the applicants
understand the rules of the road for running a charitable nonprofit, including
that the organization will benefit the public, not themselves.(source)

--------------

The trusting nature
of the organizations, combined with limited, often casual, internal controls,
makes charities susceptible to fraud. There is a discernible trend in Southeast
Texas. The average loss is $100,000, an 11 percent increase from the previous
study and a significant loss to any charitable organization.

Skunk of the Month…

Skunk of the Month is the twice-monthly designation
made by Nonprofit Imperative, the
organization dedicated to eliminating waste, fraud, abuse and mismanagement in
nonprofits and government. The Skunk of the Month award is given to
charities and government officials who show blatant disregard for the interests
and trust of contributors and taxpayers. This month’s example is:

“They
came to do good and they did very well indeed (for themselves).”

$12.4 of Special Needs Funds Taken; More, Church Fraud

Four New York men, including a rabbi,
were indicted for allegedly stealing more than $12.4 million in funding
intended for children with disabilities.The indictment charges that they
diverted money intended for the Island Child Development Center, which serves
Orthodox preschool children with disabilities, and used the stolen funds for
personal expenses, home repairs and other business endeavors, as well as to
benefit various Orthodox Jewish institutions in New York State. Approximately $8 million allegedly went to numerous
religious schools and summer camps, including $3 million to the B’nos Bais
Yaakov Academy, an Orthodox girls school also in Far Rockaway where Hiller is
principal.

More than $1 million in
Island Child checks were cashed or had cashed, many in

the names of individuals
or businesses that had not consented. If convicted, each of
the defendants faces up to 25 years in prison. (source)

More of the same:A New York City
clergyman whose use of millions of dollars raised for 9/11 and Hurricane
Katrina victims triggered a state investigation has agreed to pay $1.2-million
in restitution to his church to settle the inquiry. The $1.2-million repayment involves church funds
authorities said the couple used to buy an 18th-century farmhouse in rural New
Jersey.

The perpetrator’s nonprofit groups, Urban Life Ministries
and Aid for the World, rose $4.8-million in 9/11 and other disaster appeals. He
and Ms. Keyes allegedly used funds from the church and the charities on
extensive travel, on a luxury car, and to cover hundreds of thousands of
dollars in personal debts.

Still more of the
same: A pastor at Wellspring Church in MI
is charged with embezzlement of $18,000. He is at another church nearby.

Yes, more: A former pastor convicted of embezzling
from his Scottsville (KY) church was sentenced to seven years in prison. Police
determined he had stolen about $300,000 from New Gospel Outreach Church over a
period of about 10 years.

Yes more: A woman will spend the next two years in
prison for embezzling more than $303,000 from the Lutheran Church of the
Resurrection (MO) checking account for over 4 year period.

Yet another:The church's trusted money man --
handling synod books and volunteering for its nonprofit organization, Rural
Life Outreach was sentenced in Clay County (MN) District Court to four years in
prison for stealing more than $750,000 from the synod. For more than 4 years, he
stole money that congregants had left in the collection plate during services
including money that was designated for the church's hunger appeal while
writing hundreds of checks to himself.

Another example of a Veteran organization that is a scam

National Women
Veterans Association of America (NWVAA) director Tara Jones wanted to use
donations to buy a yacht to live on and then rent it to other nonprofits to
make money.When asked, Jones could
never explain how her group helped veterans. A local San Diego television
station broke the news of allegations from former employees that Jones gambled
donations in Las Vegas. She spent $15,000 for a gala where 20 people showed up.
She owes tens of thousands of dollars for contracts that were broken.

More
of the same:Oregon authorities have accused the father of an
Iraq War veteran who committed suicide after his tour of duty of collecting
donations to a nonexistent charity named for his late son. Investigators say he
accepted online gifts to the Matthew M. Brennan Foundation, ostensibly to
benefit soldiers with post-traumatic stress disorder. The foundation does not
have a 501(c)(3) designation. Authorities say contributions to the foundation
went into Michael Brennan’s personal bank account and that he persuaded local
contractors to donate remodeling services

Another one:
The National Veteran Services Fund
(CT) was hit with an $830,000 embezzlement. NVSF is a nonprofit organization
that accepts donations to assist veterans and their families across the
country. The bookkeeper’s responsibilities included payroll and the
disbursement of funds to the charity's clients, according to police. The
auditors picked it up after 5 years of thefts.

Charity Check Up:

UK Regulators Close Charity That Funded Its Trustees

Aiding Children, a UK children’s charity that was used as a front for trustees to use donations
for their own benefit, has been shut down.The charity was registered to provide "relief
of poverty and hardship among children", according to its leaders but showed
that only 6 per cent of its income was spent on charitable
purposes. Following an audit of old bank account records, it was found
regular payments to all of the former trustees. The agency was referred to the
national fraud and Internet crime report center.

Unregistered Homeless Refuses to Show Proof; There Is None

An unregistered The Foundation
for America's Homeless website offered up photos of serene tented campsites, even a
cabin in the woods with working electricity.
But whenWESH
2 NewsInvestigative
reporter Matt Grant asked the charity's director to show them where those
campsites are, he would not.

And he has
repeatedly refused to show them proof the charity has provided shelter to
anyone at all.

It turns out that cabin in the woods is
actually a bathroom at Yellowstone National Park. And a photograph of a tent on
the website was actually taken by a blogger in Canada who told us she never
gave permission for the Foundation to use her photo.WESH 2 News Investigates began, yes, investigating. With a
day or two several changes had been made to charity's founder LarryHamer's website. The photos of tents
and campsites were removed and the headline on the Foundation's website had
been changed from, "We are housing America's homeless," to, "We
provide needs for America's homeless."

While Hamer
refused to open his financial books to WESH 2 News, the Foundation's federal
tax documents are public record. The 2012 documents were shared with Ken Berger
of Charity Navigator, who said there were a number of potential red flags,
including not reporting administrative expenses and listing a salary expense
while claiming the charity has no paid employees.

"You need
to be able to trust a charity, and when they are manipulating images, when they
are refusing to give you basic information. This seems like an organization
that is questionable at best," he said.(source)

A Thought or Two:

Sex-slave crusader ousted from foundation as her tale crumbles

One of the world’s leading anti-sex slavery
activists got bounced from her own foundation (SomalyMam
Foundation) because her heartbreaking tale of being
sold into child prostitution and years of abuse fell apart.

SomalyMam had
become the pretty, glamorous face of the anti-sex trafficking movement,
courting celebrities and world political leaders.

Friendsof Mam said she grew up with both
parents, graduated from high school and led a happy, comfortable
childhood.

“[With donors], she’s very polished and very on and very charming
… exceedingly charming,” a whistle-blower told Newsweek. “And when people are
not there, she can be tyrannical; she’s moody, she’s erratic, she’s entitled.”

The foundation has raised millions of dollars and Mam's salary
exceeded $125,000. (source)

Can’t Help Himself, So The Courts Will Do So

A former Ohio man
convicted in 2008 of embezzling more than $1.8 million from a non-profit
organization that operates residential care facilities for the mentally
disabled is accused of violating his probation, and has a court hearing next
month.

Craig Rohr was
convicted of multiple felony counts and sentenced to nine years in prison in
October 2008 for stealing more than $1.8 million from Hartville Homes. The
theft occurred between 2001 and 2007 while Rohr was employed as the
organization’s chief financial officer. Rohr also was charged with stealing
$100,000 from St. Barbara Catholic Church in Massillon, and $21,769 related to
rental property owned by the church.

Rohr, who served
as the church’s financial adviser from February 2002 to October 2005, deposited
the money into other accounts.

In a separate case,
Rohr was convicted in Summit County for felony theft in connection with his
former Cuyahoga Falls-based business, Falls Consumer Credit Management.

1.The Robin Hood American
Dream Fund, which supports groups helping immigrants and their families, raised
$60-million at its annual gala. The fundraising total fell from the
$80.5-million collected at last May’s gala. Over half the funds raised – $35
million – will go toward a newly launched Robin Hood American Dream Fund, for
support of non-profit organizations that help immigrants and their families
gain the skills and resources they need to move from poverty to prosperity. Since
its founding in 1988, the Foundation states it has raised and granted more than
$1.45 billion in support of New York’s neediest residents.

2.With Las Vegas-style charitable gambling events
that regulators say have run amok, Michigan is trying to institute regulations
to rein them in. Revenue from the events was only $7.9 million in
2002 but jumped to $184 million a decade later.

3.Robert Gates, former secretary of defense
and director of the Central Intelligence was elected to the troubled Boy
Scouts of America. The agency continues to be roiled by its policy on gay
Scouts and leaders. The Boy Scouts’ national board voted to allow openly gay
children to become Scouts but to continue to bar openly gay adults from
leadership positions; the group has been criticized by some for having gone too
far, and by others for not going far enough. Some groups, including the Southern Baptist Convention, have
condemned the Boy Scouts for admitting gay youths. But several companies,
including Disney and Merck, have announced in recent months that they plan to
cut off funding if the Scouts do not change the rule prohibiting gay adults.
This week, gay rights advocates submitted a petition to Amazon.com with about
125,000 signatures asking the company to remove the Boy Scouts from its list of
charitable organizations.

4.Another award winner is another
embarrassment: The recipient of a Hallandale
Beach humanitarian award — has been charged with bilking thousands in city
funds earmarked for a student trip. The bandleader forGulfstream Middle Schoolin
Hallandale Beach, is also director of the Palms Center for the Arts, a
nonprofit school for drama, dance and music has been charged with stealing
thousands of dollars.

5.The
former top official of the Girl Scouts of Greater Los Angeles who pleaded
guilty to embezzling nearly $370,000 from the organization has been sentenced
to 20 months in federal prison.

6.A
Florida pastor was found dead of an apparent suicide amid an investigation he
had embezzled about $200,000 from St.
Joseph Catholic Church, authorities said.

7.The founder of USA Harvest pleaded guilty to
stealing $183,354
in donations that he solicited on behalf of the nonprofit USA Harvest. Hugh "Stan" Curtis acknowledged depositing $164,620
into his personal account and cashing donation checks totaling $18,734 and
using the funds for his personal benefit. Curtis did not report the $183,354 as
income with the Internal Revenue Service. Of the $553,891.67 in unreported
income, prosecutors said, Curtis used about $370,537.67 in USA Harvest funds to
pay for personal meals, personal travel and personal entertainment expenses. In
total, Curtis failed to pay $270,000 in federal income tax from calendar years
2005 through 2008.

31.University of Rhode Island Feinstein College of
Continuing Education $200,000

32.Grand Isle County courthouse and the Champlain
Islands Parent-Child Center (VT) up to $500,000

33.Pulaski County High School cheerleading (VA)$50,000

Political/public official chicanery(just a few):

1.A former employee of
the Greenwood County (SC) Sheriff’s Office was indicted for embezzling over
$10000 from the agency over 5 years.

2.Ex-treasurer of the
Hershey Volunteer Fire Department was sentenced to1 to 5 years in state prison,
plus 2 years of probation for embezzling $129,000 from the nonprofit group.

3.A former supervisor for
Oklahoma City’s Animal Welfare Division has been charged with embezzlement of
$5,143.30.

4.A woman with a previous
felony embezzlement conviction was given control of public and donated money at
the University of California at Berkeley, where Sonia Chante Waters is accused
of stealing tens of thousands of dollars to pay for her childrens’
private-school tuition and other expenses. Waters, the daughter of a
former UC Berkeley employee and prominent Black Panthers leader, allegedly forged
a former dean’s signature on university checks several times beginning in early
2013. Waters’ attorney says his client admitted she had stolen university
money. A university spokeswoman said UC Berkeley was still determining the
amount stolen, but the attorney says the school told him it could be as much as
$90,000.

5.A former Montezuma
County undersheriff accused of using taxpayer money to pay for personal items,
including firearms, has been sentenced to 30 days in jail. Cronk was initially
charged with 17 embezzlement counts and one count of official misconduct
involving purchases totaling more than $7,400. He was accused of trying to sell
some of the firearms by posting classified ads.

6.A former deputy clerk
in the Albemarle County (VA) Circuit Court Clerk’s office has been charged with
embezzlement after allegedly pocketing nearly $14,000 in court fees over four
years.

7.Former
Weirton Mayor Mark Harris has agreed to pay more than $16,000 to the city in
exchange for the dismissal of criminal charges against him and his wife.

8.A Watertown (SD) woman
accused of embezzling more than $100,000 from the local school district has
been sentenced to 10 years in prison and fined $10,000 and also ordered to pay
restitution of nearly $147,000.Authorities say she took the money while she was
benefits coordinator for thedistrict.
She was fired late last year and pleaded guilty in May to a grand theft charge.She was previously convicted of embezzling from
her father-in-law's business in Iowa in the late 1990s.

Nonprofit
Imperative gathers its information principally
from public documents...some of which are directly quoted. Virtually all cited
are in some phase of criminal proceedings; some have not been charged, however
there is money missing. On rare occasions, there may be duplicates.

Gary
Snyder is the author of Silence: The Impending Threat to the Charitable
Sector (Xlibris, June, 2011) and Nonprofits: On the Brink
(iUniverse, February, 2006) and articles in numerous publications. The book can
be bought at amazon.com,barnesandnoble.com, Barnes and Noble (store)

About Me

Gary Snyder is the author, most recently, of the groundbreaking expose on the charitable sector, Silence: The Impending Threat to the Charitable Sector as well as the often-cited guide on best practices and key concepts, Nonprofits: On
the Brink.

He is the publisher of a
twice-monthly newsletter, Nonprofit Imperative that gives an update on the current status of the
charitable sector.

Snyder is often quoted and frequent contributor to the blog of the National
Committee for Responsive Philanthropy. Snyder twiceauthored the Governance Chapter of the Michigan
Nonprofit Management Manual (4th and 5th editions).

He is a speaker on ethics,
financial and governance matters of the sector. For almost a decade, Snyder is frequently
consulted by Congress and has been quoted in print, broadcast and online media
outlets.